Service organisations Flashcards
Drawbacks service organisation
Access to info
If access to info denied by a org. May impose limitation of scope on auditors work
If s & approp evidence not obtained= modified opinion
Service organisation
3 benefits to auditor
1) independence
Siri is external to client more reliable than evidence from client
2) competence
S org = specialist resulting in fewer errors
3) possible reliance on a org auditor
May be possible for clients auditor to confirm info directly with serv org auditors
Auditor should determine effect use of service organisation will have on assessment of risk
5 things to consider
Reputation
Existence of external supervision
Extent of controls operated by service organisation
Experience of errors & omissions
Degree of monitoring by user
Service organisation is taken into a/c when planning audit
Auditor will need to -2
Obtain. Understanding of s org sufficient & appropriate to identify & assess Risk Material MiSTatement
Design & perform a procedures in response to those risks
Service organisation
Responding to assessed risks
A should determine whether s& approp evidence is available from client
If not perform FURTHER a PROCEDURES
……
If controls expected to operate effectively obtain type 2 report & consider whether
- date covered by report = approp for audit
- test of control performed by auditor are relevant to fs assertions & time elapsed since performed
Complementary controls - whether client has any
Perform test of control at Serb org / use another auditor to
Service organisation
Responding to assessed risk
Auditor should enquire of client whether
S org. Reported any fraud to them
/aware of any fraud
/ non compliance
/ uncorrected misstatement
Service org
Auditor is required to obtain understanding of services provided-4
Materiality of transactions to entity
Effect on internal controls
Level of interaction between activities of s org, & entity
Contractual terms between s org & client
4 sources of info about Service org
Contact s org through client
Visiting s org
Use another auditor to perform tests of control
Obtain type 1/2 report from service organisations auditor
If auditor intends to use report from service organisations auditor they should consider - 2
1 competence, independence of Service org
2 standards under which report was prepared
Service organisation
If sufficient appropriate evidence not obtained - what opinion?
2 use of service org mentioned in auditor report?
Qualified/disclaimer of opinion
No
Ref to a org work may be included in report Modified Opinion
( if relevant to understanding of modification)
Does not diminish a responsibility for opinion
Service organisation
Type 1 report
Description of design of controls @ serv org prepared by manage my of s org
Includes report auditor - of s org
Option on
- description of system
- suitability of controls
Type 2 report
Description, design & operating effectiveness of controls @ s org
Includes report by service org auditor opinion on:
- description of system
- suitability of controls
- effectiveness of controls
- description of tests of control performed by auditor
